Textiles

03/21/2013

Lululemon Athletica Inc.’s problem isn’t just that a batch of its black yoga pants were made too sheer and had to be recalled – the popular retailer is now downgrading its financial predictions and watching its stock do a downward dog.

Inside a Lululemon store (Click Image To Enlarge)

The Vancouver, B.C., company said late Monday that it pulled the women’s pants from its stores and e-commerce sites over the weekend after learning that the material was too revealing. The Luon fabric is produced in Vietnam and Taiwan and made with a mix of nylon and Lycra spandex fibers.

In a lengthy FAQ posted on its website, the chain said it was still investigating how a batch of too-skimpy pants was allowed to reach stores in early March. Lululemon hasn’t changed its manufacturers or ingredient quality since 2004, it said.

Celebrities wearing Lululemon yoga pants provide a lot of PR for the company (Click Image To Enlarge)

Or, in the company’s words:

“The ingredients, weight and longevity qualities of the women’s black Luon bottoms remain the same but the coverage does not, resulting in a level of sheerness in some of our women’s black Luon bottoms that fall short of our very high standards.”

Lululemon is now offering affected customers full refunds or exchanges while also warning of an impending shortage of black yoga pants. The recalled apparel makes up 17% of the women’s pants and crop pants Lululemon sells in stores.

Classic black Lululemon yoga pants (Click Image To Enlarge)

But it’s more than practitioners' poses being affected – Lululemon said the “issue will have a significant impact” on its financials.

The company lowered its expectations for an 11% increase in same-store sales and revenue between $350 million and $355 million for its first fiscal quarter. Now, Lululemon is projecting a 5% to 8% same-store sales range and revenue between $333 million and $343 million.

The company will unveil its fourth quarter and full-year earnings on Thursday. But already, analyst Sam Poser of Sterne, Agee & Leach downgraded Lululemon’s shares to a neutral rating from buy, telling investors to back off until quality-control concerns are alleviated.

Lululemon's problem are $20 million worth of black see-through see-through yoga pants like these (Click Image To Enlarge)

Lululemon had been riding a recent surge in demand for women’s athletic wear, along with competitors such as Gap Inc.’s Athleta, Under Armour Inc. and even mass-market retailers such as Forever 21 and Victoria’s Secret.

In early morning trading, Lululemon stock fell as much as 5.9%; as of 9:15 PDT, it was down $3.60, or 5.5%, to $62.30.

COMMENTARY: Could Lululemon spark a new fashion trend: See-through black yoga pants? I have a feeling that we will be seeing a few of these see-through yoga pants somewhere, some place. The ladies look sexy in them, they know it too, and why not show off the goods underneath? It's probably a bad business for Lululemon judging from the recall, but I will be looking out for the see-throughs with apprehension. LOL

Lululemon Sales Strategy: Scarcity and Eavesdropping

In a series of interviews, Lululemon's executives explained the chain's strategy for stoking demand for Wunder Under pants, Scuba hoodies and racerback tanks. Unlike most retailers, Lululemon doesn't use software to gather customer data, doesn't build lots of new stores, doesn't offer generous discounts and purposely stocks less inventory than it can keep on its shelves.

Instead, the Vancouver company stays in close contact with its customers and cultivates a sense of scarcity, and during a time when most retailers have used discounting to drive sales, it uses pricing power to its advantage to keep items flying off the shelves.

The moves are largely the idea of Chief Executive Christine Day, who took the top job in June 2008, and so far they have paid off.

The Lululemon See-Through Yoga Pants Scandal Continues

After customers complained that a batch of the company's signature yoga pants were too transparent, Lululemon tried to make a scapegoat out of the Taiwanese company that manufactures the pants. Bad idea. Said supplier now says the pants were no different than any other batch. The Eclat Textile Company, whose clients include everyone from Gap to Under Armour, said Tuesday that Lululemon had signed off on the shipment, suggesting that Lululemon made the whole thing up. Eclat's chief executive Roger Lo told The Wall Street Journal.

"All shipments to Lululemon went through a certification process which Lululemon had approved. All the pants were manufactured according to the requirements set out in the contract with Lululemon."

Ladies and gentlemen, we have a yoga pants scandal on our hands.

So which one is it? Did Eclat make a bad batch of $100 yoga pants, or did Lululemon just design transparent $100 yoga pants and milk the market for as long as it could? It's really hard to say. When Lo talked to the press, he said that Lululemon hadn't contacted his company about the recall — which is kind of weird since Lululemoneffectively blamed Eclat for screwing up the "level of sheerness" during the manufacturing process. (It's worth pointing out that Lululemon also said it was working closely with the manufacturer "to understand what happened during the period this fabric was made.") It's possible that there's a third party, some company that supplied Eclat with the fabric for the pants, clearing it somewhat from the blame. But at this point, this particular incident really is a frustrating finger-pointing match that's left Lululemon out about $20 million in lost sales and a whole lot yogis out of high-priced pants.

Let's get real about this stretchy trousers tale, though. It's pretty obvious that the supplier gains nothing by saddling the blame, however the perhaps unexpected media circus that gathered around this see-through yoga pants scandal highlighted a number of questionable incidents in recent Lululemon history. As a Credit Suisse analyst pointed out in a note to clients that this is Lululemon's "fourth quality control issue in the last year." Not counting this latest debacle, two out of the other three issues involved the sheerness of its fabrics. Clearly, something is up.

Along these lines, other analysts suggested that Lululemon needs to spend more time in Taiwan to make sure the manufacturers' work is up to snuff. No matter whose at fault in the growing list Lululemon's quality control issues, it can't hurt to get to the root of the problem. Then maybe next time, someone will spot the bad batch, before they ship $20 million worth of transparent yoga pants around the world.

Lululemon Does Not Inform Customers Using Social Media

I checked Lululemon's Facebook and Twitter accounts to see if there was any mention of the see-through yoga pants recall, and was very surprised that there was not a single newsfeed post about the recall or how customers were to be compensated for returning any yoga pants covered under the recall. I am not saying that Lululemon is negligent in not posting something about the recall, but it appears to me that they are treating the whole affair as if it never happened.

The Financial Impact Of The Recall

$20 million worth of recalled yoga pants is not a huge amount, considering that it only represents 1.42% of Lululemon's gross revenues ($1.4 billion just reported today) for the fiscal year ending January 31, 2013. However, it's still a public relations disaster, because the company charges premium prices for its yoga pants, and customers expect much better quality and better manufacturing controls to prevent this sort of thing from happening.

The financial fallout of that $20 million yoga pants recall will be felt on Lululemon's bottomline. Lululemon generated estimated net income of $237 million in the fiscal year ending January 31, 2013, so the amount represents 8.4% of net income, and that is very material. No wonder the company's stock declined by 5% on the day that the recall was announced.

12/22/2012

Over the past few years there have been tantalizing reports that scientific progress was on the cusp of creating a real life invisibility cloak. But upon a closer reading, these experimental technologies didn’t amount to much beyond reminding us just how far off we are from the fictional universe of Harry Potter.

University of California researchers announced last year that they had developed a metamaterial fully capable of hiding objects from the naked eye. The breakthrough does, though, lose much of its luster considering that they’d still have to figure out a way to scale up the technology to mask objects beyond the size of a red blood cell.

Duke University just last month announced a diamond-shaped design that bent light around an object so perfectly, it even concealed shadows. Too bad the illusion only worked when looking straight and in one direction.

HyperStealth Biotechnology Corp. created the following mock-up photos to show the public what they claim their 'invisibility fabric' (Click Image To Enlarge)

Now, a little-known Canadian defense firm called HyperStealth Corp claims to be closing in on a breakthrough technology that should soon lead to a true, in every sense of the term, invisibility cloak. And to allay skeptics, company CEO Guy Cramer told CNN in an interview that they’ve even garnered strong interest from the U.S. military after demonstrating to officials how the fabric’s light-bending properties prevent the wearer from being detected entirely.

Development of the material codenamed “Quantum Stealth” has been kept shrouded in secrecy. The project’s web site reveals very few details about how the technology actually works, except that it’s lightweight, inexpensive and reduces 95 percent of an object’s shadow. The page also includes a few mock-up photos that illustrate what the material’s remarkable camouflaging effect would look like, along with an explanation from Cramer as to why they’ve decided to at least go public with their design.

Click Image To Enlarge

According to the site, Cramer started to receive a lot of attention from the media after giving a talk at a military trade show about the company’s development of an inexpensive and lightweight “light-bending material.” He said.

“After enough press had been written on the subject, the U.S. Military Command finally asked to see the real material to verify that it worked. Those meetings took place with very limited ‘Need to Know’ access and the technology is now moving forward.”

Click Image To Enlarge

If substantiated, the implications are tremendous. Snipers would be able to position themselves covertly with very little risk of being spotted, while troops could use the cloak to elude capture or to carry out surprise raids against enemies. On a more ambitious front, the invisibility-inducing material may even someday enable aircraft and ships to take the notion of “stealth” to a whole new level.

However, Cramer says that, once available, it’s likely that only the military will have access to the Quantum Stealth’s special effects, at which point, it’ll be hard to hide the collective excitement.

COMMENTARY: Guy Cramer, President and CEO of HyperStealth, said that there have been similar inventions over the years but his is the only one with a 360-degree view.

He said he isn’t able to discuss details or do demonstrations of Quantum Stealth for security reasons, but claims several military groups in Canada and the U.S. have expressed interest.

Cramer said.

“We’ve also got a countermeasure for the device to be able to detect it. It [costs] about $100 to $200 per soldier which is about what their uniforms are costing them right now.”

Only mockup photos are currently available to the general public.

Colin Worth, a recently retired RCMP officer, said he went to Ottawa with Cramer to demonstrate Quantum Stealth in front of the Canadian Armed Forces.

Worth said.

“I don’t have a vested interest in the company or the technology, but I’ve seen it work. The stumbling block last time I talked to Guy was how does he make it big enough and how does he make it portable enough to work in a real life situation?”

Worth said that he signed a secrecy and confidentiality agreement so he isn’t able to give any details, but said “stuff just seems to disappear. It’s weird the way it works but it does work.”

Bill Jarvis, a retired Navy Seal, also said he has seen the fabric work at U.S. Military Command meetings.

Cramer said that he would consider marketing Quantum Stealth to the general public only if the military allowed him to do so.

He hasn’t been approached by any Harry Potter fans yet.

On October 19, 2012, Guy Cramer, President/CEO of Hyperstealth Biotechnology Corp. announced its new cloaking technology called "Quantum Stealth." Here's a copy of that press release.

01/17/2011

The founder of Kenneth Cole, who goes by the same name, is fond of saying that "today is not a dress rehearsal." Recent years have driven home that harsh reality as the company has tightened its belt by laying off staff, reallocating marketing dollars, reducing inventory, renegotiating rents and closing eight unprofitable stores. Yesterday it announced that its flagship store in Rockefeller Plaza in Manhattan would be one of an additional nine "underperforming" full-price stores to close in coming months.

But Cole has also been both an inspiration to many and an inspiring start-up story (we'll get to that at the end), and it was nice to be able to hear CEO Jill Granoff say "what a difference a year makes" in a webcast presentation from the ICR XChange Conference in Dana Point, Calif., yesterday. She went on to report that the company has shown growth for the first time since 2006, in all segments, and has had five consecutive profitable quarters. It still has 100 freestanding stores in the U.S. and 70 more in 50 countries around the world.

Unless you are an investor or competitor, or see poetry in phrases such as "efficiencies in the supply chain" and "maximizing value," I don't suggest that you listen to Granoff's entire presentation. It is enough to know that the company is positioning itself as "the quintessential lifestyle brand for modern men and women who are confident, clever and cool"; that it brings "aspirational city living to the world"; and that it garners 88% in brand awareness and 90% in brand favorability ratings.

If you live in New York, it has been impossible to ignore the presence of Cole, who has been one of the more prominent practitioners of social activism in advertising. He was an early activist for HIV and AIDS awareness, and has also been a staunch advocate for the homeless. Many people seem to like Cole's ads. Some don't. But they do always engage the viewer. They do take a stand. And they do stay somewhat relevant to the product in doing so.

Take a look at the comments for the "We All Walk in Different Shoes" campaign from a couple of years ago, which includes such images as an African American born with Albinism and an Orthodox Jew "who found God in Bob Marley." It really hit home with some. Others make comments such as, "we all walk in different shoes ... but apparently, all women walk in really high heels" and "I guess only really skinny people walk in different shoes."

Kenneth Cole at New York Fashion Week 2010

The ads, in other words, get people talking. And thinking. As did a Kenneth Cole van I saw parked in midtown Manhattan a couple of weeks ago. On the side was printed: "Driving round looking for friends" and the website address,kennethcole.com, and @KennethCole Twitter handle. The company also has a Facebook presence. Frankly, they're not doing anything particularly exciting online, but Granoff suggested yesterday that this would all change in 2011 and that the website was soon to become a very potent channel. We'll see.

I will probably remain more of a Kohl's guy than a Cole guy, at least until Kenneth starts sending me "take an extra 30% off everything" when you use your charge card flyers in the mail, too. (Sometimes I walk out of Kohl's clutching my "Kohl's Cash" coupons -- $10 for every $50 spent on top of the 30% off the already 50%-reduced item -- thinking that I've just gotten paid for upgrading my socks drawer.) That digression out of the way, count me among those who are rooting for Cole's reinvention in cyberspace if only because I admire his gritty beginnings, which were literally in the street.

The legal name of the company, which designs, sources and markets footwear, handbags, apparel and accessories under the brand names Kenneth Cole New York; Kenneth Cole Reaction; Unlisted and Le Tigre and also sells footwear under the Gentle Souls mark, is Kenneth Cole Productions, Inc. Stop me if you've heard this story, or listen to Cole tell it himself, but here's how it went down.

When Cole wanted to launch his Kenneth Cole, Inc., shoe business in 1982, he couldn't afford a room at the big trade show that took place at the Hilton in New York City. So he asked the city if he could park a truck outside to display his wares. Not unless he was a utility or a movie production company, he was told. So overnight he changed the name of the company to Kenneth Cole Productions, Inc., got a permit from the mayor's office and began shooting the epic film, "The Birth of a Shoe Company" out of a 40-foot trailer parked near the Hilton.

"Sometimes there was film in [the director's] camera; sometimes there wasn't," says Cole. But he sold 40,000 pairs of shoes out of that truck and was "off and running."

In New York they call that chutzpah, and it can take you all the way from the curb to a $14.5 million co-op apartment on Sutton Place.

COMMENTARY: The Great Recession hit the high fashion industry very hard, especially luxury designer brands, so it does not surprise me that Kenneth Cole was hit hard and had to reorganize the company, but they have successfully turned things around, and things are looking up.

Kenneth Cole's online presence sucks. That website is so Macy's and boring. The fashion designer has a very high brand awareness, and they should be taking advantage of this by redesigning their website and improving their social media presence on both Facebook (128,000 friends) and Twitter (8636 followers). Those are pathetic numbers for such a well known brand. I definitely look forward to seeing a major improvement.

I have always like Kenneth Cole's classical, urban and functional every day, year-in-and-out designs. A bit too much black, but's that customers are wearing. I bought a computer bag a few year's back, and it lasted forever.

Kenneth Cole's involvement with social causes and numerous philanthropic activities like helping the homeless and his involvement in HIV/AIDS is legendary. You have to respect him for that.

The undies are printed directly over your naughty bits, some in metallic ink that’s theoretically visible under the flash of an X-ray. The image: text of the Fourth Amendment. So while security guards scan the most intimate reaches of your body, they’ll get a lesson on Constitutional protections against unreasonable searches and seizures -- that or a sort of homework assignment. As the crotch of one pair of boxers says: “Read the 4th Amendment Perverts.”

It all started when we removed our shoes to go through an X-ray scanner. What a great canvas the top of a pair of socks are - a place to make a statement about the hassles we have to go through to be safe. So printing the 4th amendment on them seemed like a nice way to make a statement - without being a pain in the ass to the already harrowed TSA employees. In fact, many of us approve of and willingly undergo the airport security protocols. But that doesn't mean we shouldn't question whether it's the very best solution.

The line include socks, T-shirts, boxers, panties, and bras (complete with TSA logos for nipples), and they’re available on Etsy.com for $10 to $45. Apparently, some have actually sold out, which suggests that even if people aren’t irked enough to partake in organized protests, they’re plenty willing to use fashion as a picket sign. It’s practically an American tradition.

COMMENTARY: Maybe it's just the rebel and question authority in me, but this is one fucking cool idea. I was just on the 4th Amendment Wear website and most of their products are unfortunately out-of-stock. That's hot. Possibly a new trend?

A research and development effort by the University of Notre Dame, the University of Wyoming, and Kraig Biocraft Laboratories, Inc. has succeeded in producing transgenic silkworms capable of spinning artificial spider silks.

"This research represents a significant breakthrough in the development of superior silk fibers for both medical and non-medical applications," said Malcolm J. Fraser Jr., a Notre Dame professor of biological sciences. "The generation of silk fibers having the properties of spider silks has been one of the important goals in materials science."

Natural spider silks have a number of unusual physical properties, including significantly higher tensile strength and elasticity than naturally spun silkworm fibers. The artificial spider silks produced in these transgenic silkworms have similar properties of strength and flexibility to native spider silk.

Silk fibers have many current and possible future biomedical applications, such as use as fine suture materials, improved wound healing bandages, or natural scaffolds for tendon and ligament repair or replacement. Spider silk-like fibers may also have applications beyond biomedical uses, such as in bulletproof vests, strong and lightweight structural fabrics, a new generation athletic clothing and improved automobile airbags.

Until this breakthrough, only very small quantities of artificial spider silk had ever been produced in laboratories, but there was no commercially viable way to produce and spin these artificial silk proteins. Kraig Biocraft believed these limitations could be overcome by using recombinant DNA to develop a bio-technological approach for the production of silk fibers with a much broader range of physical properties or with pre-determined properties, optimized for specific biomedical or other applications.

The firm entered into a research agreement with Fraser, who discovered and patented a powerful and unique genetic engineering tool called "piggyBac." PiggyBac is a piece of DNA -- known as a transposon that can insert itself into the genetic machinery of a cell.

"Several years ago, we discovered that the piggyBac transposon could be useful for genetic engineering of the silkworm, and the possibilities for using this commercial protein production platform began to become apparent."

Fraser, with the assistance of University of Wyoming researcher Randy Lewis, a biochemist who is one of the world's foremost authorities on spider silk, and Don Jarvis, a noted molecular geneticist who specializes in insect protein production, genetically engineered silkworms in which they incorporated specific DNAs taken from spiders. When these transgenic silkworms spin their cocoons, the silk produced is not ordinary silkworm silk, but, rather, a combination of silkworm silk and spider silk. The genetically engineered silk protein produced by the transgenic silkworms has markedly improved elasticity and strength approaching that of native spider silk.

"We've also made strides in improving the process of genetic engineering of these animals so that the development of additional transgenics is facilitated," Fraser said. "This will allow us to more rapidly assess the effectiveness of our gene manipulations in continued development of specialized silk fibers."

Since silkworms are already a commercially viable silk production platform, these genetically engineered silkworms effectively solve the problem of large scale production of engineered protein fibers in an economically practical way.

"Using this entirely unique approach, we have confirmed that transgenic silkworms can be a potentially viable commercial platform for production of genetically engineered silk proteins having customizable properties of strength and elasticity," Fraser said. "We may even be able to genetically engineer fibers that exceed the remarkable properties of native spider silk."

The genetic engineering breakthrough was announced today (Sept. 29) by Dr. Fraser, Dr. Lewis and Kraig Biocraft CEO Kim Thompson at a press conference on the Notre Dame campus.

COMMENTARY: I am amazed that it took 70 Madagascar worker's over four years to collect the silk from one million spiders to produce the spider silk fibers in that yarn over 100 years ago. I bet that feat is in Ripley's Believe It or Not.

Kraig Biocraft Laboratories' breakthrough technology to produce artificial spider silk faces further challenges before the process is commercially viable and any yarn is produced. I have a feeling we won't be waiting too long. Bullet-proof chest protectors produced from yarn made from spider silk.